Ann Taylor shoe showroom

Shares of Ascena Retail Group rallied Monday during after-hours trading after the company reported earnings beating Wall Street’s top-line expectations.

Comparable sales at the American retail group increased 3 percent during the first quarter of fiscal year 2019, or the period ending Nov. 3, 2018, to $1.59 billion, compared with $1.58 billion during the same period last year.

The largest gains were in companies’ premium fashion labels like Ann Taylor and Loft, which had 7 percent and 9 percent increases, respectively, and a 12 percent increase in teen-fashion brand Justice.

“Our first-quarter results represent another step forward in our journey to transform Ascena into a more agile, profitable company,” chairman and chief executive officer of Ascena Retail Group David Jaffe said in a statement.

Shares soared about 12 percent Monday after the bell, after closing down 9.3 percent to $2.73 a share during Monday’s session. The stock is down roughly 40 percent in the last six months.

“Ascena’s transformation is driving solid comparable sales increases in key segments and for the business overall,” Michael Simon, an analyst at Moody’s wrote in a note Monday. “However, more work lies ahead in addressing challenges in the plus and value segments.”

The work ahead includes its bottom-line returns. Net income for the quarter after taxes was down to $5.9 million, from $6.6 million in the same period last year.

The company attributed its decreased gross margins during the quarter to higher shipping costs and more promotions across its value brands, such as Dressbarn, and plus-size fashion labels like Lane Bryant.

Gary Muto, president and chief executive of Ascena brands, said the company is focused on improving its weakest link, its assortment at value brands like Dressbarn and Maurices, and is focusing on its “core mid-50-year-old customer.” 

“The team has also spent a significant amount of time getting reacquainted with the customer,” he said on Monday afternoon’s conference call. “There’s definitely been a casualization across our wardrobe… I feel very confident that as we gain these insights, we will move very quickly to turn these insights into actionable strategies.”

Ascena’s portfolio contains eight brands, including Lou & Grey, Maurices and Catherines, and has more than 4,500 brick-and-mortar stores across the U.S.